Almost every homebuyer needs a mortgage – either to buy a property or to maintain it, as advised by MTD Lincoln Park Management. A mortgage is quite simply a loan against real estate, that the borrower returns over time. The amount that is repaid includes the original loan plus the interest.
Getting a mortgage is not a big deal – there are several lenders, including banks, credit unions and individuals that will provide one. However, getting a mortgage that is the absolute best for you, in terms of your financial situation? That is more difficult than it seems. And here is where a mortgage broker is the man of the hour!
Seems awfully nice, isn’t it?
Believe us, homebuying is a fraught process, and a mortgage that doesn’t break your back (financially speaking) is no small thing. The potential savings can run into thousands of dollars over the term of the mortgage.
If the idea of saving money for your clients interests you, maybe you would like to know more about being a mortgage broker in Canada.
It can be lucrative, offering the potential for high earnings. However, the actual income will vary widely depending on various factors.
This article walks you through a mortgage broker’s potential earnings, the influencing factors, and strategies they can use to boost their income.
Role of a Mortgage Broker
What exactly does a mortgage broker do?
Well, a mortgage broker is a licensed professional who helps their clients get financing for buying real estate. They are the go-betweens between a lender and the borrower, using their expertise to find the most suitable products.
This is not a traditional salaried position. Canadian mortgage brokers are typically compensated through commissions.
Their earnings are directly tied to successful mortgage deals with lenders and are calculated as a percentage of the total mortgage amount. The commission, or “finder’s fee,” is paid to the broker by the lender after the process is completed.
The commission rates vary depending on the lender, the loan amount, and the broker’s experience and reputation. Typically, the commission ranges from 0.5% to 1.2% of the total mortgage value.
For example, if a broker secures a $500,000 mortgage and the lender pays a commission of 0.85%, the broker will earn $4,250 (0.85% of $500,000) on that transaction.
Mortgage Broker’s Earnings – Influencing Factors
While the above-mentioned model provides potentially high earnings, a mortgage broker’s actual income is influenced by several factors:
1. Transaction Volume
The number of successful deals a broker can close is an important factor in their earnings.
Brokers who consistently generate a high volume of business will typically earn more than those with a lower transaction volume. Successful brokers do this through effective marketing, strong referral networks, and a large client base.
2. Size Matters
The average size of the mortgages a broker arranges can also impact their earnings.
Brokers who specialize in larger, more complex mortgage transactions, such as those for high-end properties or commercial real estate, earn higher commissions per deal compared to those who primarily work with first-time homebuyers or smaller residential properties.
3. Location, Location, Location
The local housing market and economic conditions can influence a mortgage broker’s earnings. Brokers operating in high-demand, high-cost housing markets, such as Toronto or Vancouver, can expect larger commissions, while those in more affordable regions see lower average transaction values.
4. Experience Counts
Experienced and well-established mortgage brokers often command higher commission rates. This is obviously due to their reputation for delivering exceptional service and securing favourable loan terms for their clients.
Newer and less experienced brokers may need to accept lower commission rates to attract and retain clients.
5. Brokerage Splits
The commission is usually split between the broker and their brokerage, though the percentage may vary.
The average is around 85% for the broker and 15% for the brokerage. Brokers who are part of larger, established or prestigious brokerages may receive a smaller split. Those with independent practices or who work for boutique firms may retain a larger portion of the commission.
Average Mortgage Broker Earnings in Canada
According to recent data, the average mortgage broker in Canada earns about $78,000 per year or $40 per hour. However, remember that this is an average, and actual earnings can vary all across the spectrum.
Entry-level mortgage brokers, typically those with less than two years of experience, can expect to earn around $58,949 per year on average. On the upper end, experienced mortgage brokers with a proven track record and a robust client base can rake in $115,000 per year.
In addition, these numbers represent the total earnings of a mortgage broker, including the commission split with the brokerage. It does not take into account their expenses, such as marketing, networking, professional development, and office overheads.
How Do You Earn More?
While we have shared what the average earnings of a mortgage broker are, there are several strategies that can give a push to their incomes. A few of them are:
Develop and Focus on a Specialized Expertise
Brokers who specialize in a particular niche, such as commercial real estate, investment properties, or specialized mortgage products, will be able to become niche experts. This can help them attract a more lucrative client base and thus command higher commissions.
Invest in Technology and Automation
There is no escaping technology. Like other professionals, mortgage brokers also should invest in digital tools and automation. Even a simple tool like a mortgage calculator can help them simplify their operations and reduce repetitive administrative tasks. This will free up time to focus on their clients and generate more business.
Networking is the Key
There is no substitute for word of mouth. Building a strong network of satisfied clients, real estate agents, financial advisors, and other relevant professionals should be on your must-do list. Anyone who can refer new business can be a source of high-quality leads.
Update Knowledge and Skills
Stay abreast of industry trends, regulatory changes, and new mortgage products.
Investing in and updating your skills through education and professional development networking will help brokers provide more value to their clients. And, of course, this means potentially earning higher commissions.
If you have built a strong network and have the experience, you may choose to take the next step and start your own brokerage. Or you can add to your existing practice. In addition to giving you a chance to prove your ability to lead a team, this will provide greater control over the commission splits and potentially higher earnings.
Here We Are!
A mortgage broker is a specialized niche in real estate.
There is a danger of long hours and high-stress situations; you need to put yourself first and maintain a sustainable working environment.
However, it can be a highly satisfying career if you love making the best deals for your clients. And it does have the potential for earning well. With the right strategy and dedication, a career as a Canadian mortgage broker can be both financially rewarding and personally fulfilling.
If you wish to know more about real estate in Canada, do visit our website.
